The Small Business Administration Office of the Inspector General (OIG) recently released its report discussing the top management and performance challenges facing the SBA in 2024. The report highlights a number of issues currently plaguing the SBA and its various programs, including abuse of economic relief programs, disaster assistance programs, and loan programs, cyber security shortcomings within the agency, and oversight of grant management. The report also notes concerns with the HUBZone and small disadvantaged business programs. However, today I want to focus on the issues identified in two programs that we at Koprince McCall Pottroff work with day in and day out: the Woman-Owned Small Business Program and the 8(a) Business Development Program.
Woman-Owned Small Business
We have discussed contracting goals in the SBA’s various posts throughout time here at SmallGovCon.com. Year after year, federal agencies fall short of the SBA goal that 5% of all federal contracting dollars be spent on WOSBs, with the intent to create “a level playing field for women business owners.” Unfortunately, that is not always the case, and the certification process has been somewhat inconsistent in fully reviewing whether the applicant firms are, in fact, woman owned and controlled, and that they are indeed small businesses, as required by SBA rules. As the Wizard says, “pay no attention to that man behind the curtain.”
The report cites to an earlier report of the WOSB Program, published in 2022. In this report, 3 of the 25 firms that the OIG audited failed to submit documentation that showed a woman owned the business. But it wasn’t necessarily SBA’s actions that caused this problem. Rather, this issue popped up when it was a third-party certifier, not SBA, that did the initial application review. In response to that, SBA took many steps to ensure this would cease to be a problem, including creating additional verification steps within the SBA. While the current report doesn’t give any updates on whether the updated policies and procedures have resulted in catching any ineligible firms that were let through by a third-party certifier, the OIG is satisfied, for now, determining that SBA has made substantial progress on the earlier identified issue.
8(a) Business Development Program
The other area of improvement in this report that I want to highlight is the SBA’s 8(a) Program. The purpose of the 8(a) Program is “to assist eligible small disadvantaged business concerns compete in the American economy through business development.” 13 C.F.R. § 124.1. But what good is a program if there is no way to monitor performance to determine whether the goals of the program are being met? The OIG determined that SBA cannot consistently determine if 8(a) participants have demonstrated their abilities to compete in the open marketplace without program assistance, and that it needs to take action to ensure the 8(a) Program is not failing its participants and to prevent ineligible firms from being awarded 8(a) contracts over eligible participants. Further, a 2022 report published by the OIG found that more than one-third of firms assessed did not have an approved business plan, a requirement to be awarded an 8(a) set-aside contract.
So, what has SBA done in response to the identified issues? While SBA has not fully established an information technology system to monitor performance and reporting of 8(a) participants, it did revise the Business Opportunity Specialist Annual Review Workbook to better assess how participants are progressing during the nine-year program. SBA also implemented new procedures to ensure business plans are monitored and updated annually, as required. To track progress, SBA has made it mandatory that the aforementioned workbook is used for all annual reviews of 8(a) Program participants. Finally, SBA is in the process of creating a “business proficiency matrix” that will provide a non-subjective assessment of participants’ progress. Taken as a whole, the OIG determined that the SBA has also made substantial progress on this issue as well.
Other Issues and Conclusion
Interestingly, the report notes that under the legacy employee aspect of the HUBZone program, “business continues to qualify as long as it has employees who lived in a HUBZone for at least 180 days leading up to the date of recertification. This means HUBZone businesses could have no employees residing in the HUBZone and still qualify.” SBA has not indicated any intent to get rid of the legacy employee rule, but we will continue to monitor it. The HUBZone program is cracking down, though, “[t]aking action to decertify firms that are no longer eligible for the program, decertifying 3,750 firms as of June 1, 2023.” Be sure that you are reviewing HUBZone requirements very closely if you are interested in that program.
The report highlights that there is a process “for handling protests, requiring that program officials review entities representing themselves as a small, disadvantaged business on a federal prime contract or subcontract whenever the agency receives credible information.” This is found at 13 C.F.R. § 124.1002. I’m not sure that people are aware or would have an incentive to provide information about a SDB subcontractor, SBA noted that since “2014, SBA has not received any requests for review.”
Good to see that SBA is making progress on improving many of the SBA certification programs for federal contracting, but there is always more to do.
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